GUAPO'S "HOW TO TRADE THE PENNIES"

A friend of mine posts some very helpful and insightful advice on penny stock forums. Here is the first installment, courtesy of Guapo (the premier penny player!):


Section 1 – Investment Goals – The Penny Market - Caveat Emptor

An investor should first determine what his investment goals are. If he is trying to build wealth for the future, for retirement for example, then definitely the penny market is not for that individual.

Blue chips and mutual funds are better, where an investor plunks down a specified amount of cash every month or every quarter and lets the cash value of his investments grow (hopefully) over time. Even blue chips are no guarantee however but they are a lot safer than penny stocks.

For a young guy that has twenty or thirty years to go before retirement and is investing for post-employment years, I’d recommend a combination of blue chips, mutual funds and real estate.

Nothing is absolute but folks will always need a place to live. The old adage “there is only so much land” and the ever increasing population are fact. Assuming we don’t have a national catastrophe where the population of the country is reduced by 10-20% or more, real estate will continue to be a good investment over the long run.

There are many kinds of real estate investments. If you decide to get into it, you have to decide what area is best for you. I have a friend I’ve known for almost forty years now. Back when we were both still in our 20~s, he started buying houses and renting them out. He ended up with about twenty houses. He’s retired and a millionaire now.

I have another friend who started about twenty years ago buying apartment complexes. He now has 165 units in several buildings that he rents, and nets after costs and taxes, about $400,000 a year. He’s doing so well that he quit his day job to manage the apartment complexes. He has a whole lot more spare time now too, and he’s only in his late 40~s.

I’m just using these examples as things you can do with real estate. There are a lot more also.

So if your investment goal is to build assets for the future, I strongly recommend you consider all the above and forget about the penny markets.

Let me repeat that. IF YOUR PLAN IS TO BUILD WEALTH FOR THE FUTURE, FORGET THE PENNIES.

However, if you want to speculate, have some fun and possess some cash you can risk, read on.